Varied Principal Equity Swaps Contract Analysis and Application

• Main Authors: Tsung-Ching Hsu, 徐宗清
• Other Authors: Wei-Pen Tsai
• Format: Others
• Language: zh-TW
• Published: 2003
• Online Access: http://ndltd.ncl.edu.tw/handle/95787690638209652202

碩士 === 輔仁大學 === 金融研究所 === 91 === In recent years, equity swap is deemed to be the most innovative products as a result of the special product features for risk averse investors. An Equity swap contract stipulates the terms and conditions of equity swap, which usually include notional principal, termination date, reset date and swap netting clauses. Equity swap investors can swap the interest, either fixed or floating, with the return on the stock/index, which usually contains dividends and capital gain. Contrast to the design and valuation of traditional financial instruments, equity swap can be tailer-made to fit in the investors’ preference through the employment of various options and securities. Moreover, the valuation of equity swap can be adjusted accordingly. Therefore, this thesis focuses on the product design, risk analysis and cash flow testing to evaluate the hedging strategy in practice. This empirical results indicate that cash flow testing built in this thesis can be used as the fundamental model for pricing equity swap. With this model, investors can design equity swap products with versatile features to meet the needs of customers with different risk preference.